Jack Kelly  writer

ILLEGAL TENDER
                          (Invention &Technology, Summer 2005)

         The U.S. Treasury Department, which had not
redesigned our currency since 1929, has done so twice in
the past decade. The reason: government concern that
counterfeiters were about to get the upper hand in an age-
old technological duel. Officials have revamped old
techniques and introduced new ones in the latest round of a
cat-and-mouse contest that has been going on since
Colonial times.
The British practice of transporting counterfeiters to the
colonies gave America a running start in the field of forgery.
But the New World hardly lacked native talent. Wampum
circulated as currency in seventeenth-century America, and
Indians sometimes dyed white strings of beads to pass for
the more valuable dark ones. Colonists were not above
pawning off fake coins on the natives in return. Concern over
counterfeiting induced the authorities of Massachusetts to
cease recognizing wampum in 1662.
The faking and altering of coins began early. “Coiners”
devised endless ways to remove precious metal from actual
coins and pass them at full value. They clipped silver or gold
from the edge of the disk, later selling the accumulated
shavings for a profit. The response of government mints was
to stamp a raised circle around the margin of the coin, as
Massachusetts did in the 1670s, or to inscribe reeding along
the edge. Enterprising counterfeiters sawed large gold coins
in half, scraped out the interior, and filled the coin with base
metal. They then soldered the pieces back together and
repaired the edges.
It was virtually impossible to replicate the weight of a genuine
gold or silver coin without changing its dimensions. Bankers
and merchants fought back using a mechanism equipped
with slots to measure the diameter and thickness of the
suspect coin. The device incorporated a balance to
determine if the sample was the exact weight of a genuine
coin. Fakes were quickly unmasked.
Coining continued well into the twentieth century, but the
main focus of counterfeiters from the earliest days was the
falsifying of paper money. The first paper currency in New
England was printed in 1690 by the Massachusetts Bay
Colony to pay troops. Robert Fenton, an experienced coiner,
altered some of these bills from two shillings six pence to
twenty shillings, kicking off a method of counterfeiting known
as “raising,” that continues today. In 1704 the first entirely
phony paper notes were printed by a gang with a press and
a copper plate. By 1730 most colonies had adopted paper
money as their primary currency, and counterfeiters were off
to the races.
A printer by trade, Benjamin Franklin was an early advocate
of paper money. Contracting to print notes for several
colonies in 1739, Franklin adopted a clever innovation to
thwart counterfeiters. He created a printing plate that
incorporated the intricate web pattern of a tree leaf. His
method -- a tricky process of transferring the image from leaf
to plaster to metal – remained secret. Even if a forger figured
out the technique, he would not be able to reproduce the
unique pattern because every leaf is slightly different.
Counterfeiting intensified during the Revolution. To finance
the war, the Continental Congress issued a shaky paper
currency founded on its own good faith. British authorities
immediately set about undermining this money with forgeries.
In January of 1776 they set up a press on board the warship
HMS Phoenix in New York Harbor to print bogus
“Continentals.” A year later New York newspapers printed
offers to supply “counterfeit Congress-Notes, for the Price of
the Paper per Ream.” Tories organized rings to pass the
notes. Several issues of Continentals were so extensively
counterfeited that they had to be recalled.
Even before the war was over the debasement of paper
currency prompted Congress to eschew notes altogether. All
Continentals were recalled in 1781 and the national
government would issue no paper money until the Civil War.
All paper currency during the formative years of the Republic
was issued by private banks.
In the early nineteenth century, the Massachusetts inventor
Jacob Perkins revolutionized banknote printing in ways that
permanently transformed the war on counterfeiting. Printers
of the day employed two fundamental ways of applying ink to
paper. Letterpress used an image in relief -- ink was applied
to raised areas and the paper pressed onto them. The
intaglio process, on the other hand, required image areas to
be carved into a smooth metal plate. The printer applied ink,
then wiped the plate clean -- ink was left only in the sunken
lines and dots. A press forced damp paper against this plate
at high pressure, pushing it into these recesses to take up
the ink.
Intaglio printing left the paper with a distinctive, slightly
embossed feel that has remained a quality of paper
currency. Both the engraving of the plate and the printing
process were demanding skills, a fact that discouraged
casual counterfeiters. The copper intaglio plate, though, was
good for only about 5,000 impressions before it began to
show signs of wear. Later notes were not quite as crisp as
earlier ones. If the engraver touched up the plate or created
a new one, the image would not be identical to the original.
Perkins, a goldsmith by training, used his knowledge of the
qualities of metals to invent a system of steel plate
engraving. He softened steel by annealing it with heat. After
engraving, he heated it in the presence of carbon to harden
it. The result was a plate that could stand up to 30,000
impressions. An engraver could also do finer work on the
harder metal.
This was only the beginning. Perkins pressed a roller of soft
steel over his hardened plates at very high pressure,
duplicating the image in relief. He hardened the roller and
used that as a die to impress another soft steel plate. The
technique allowed him to duplicate images exactly without re-
engraving, to assemble diverse components onto a single
plate, and to copy a finished plate precisely.
Perkins had assembled most of the elements of his system,
which he called siderography, by 1804. Some years later he
incorporated a device originally invented for engraving
watches. Cams and gears exerted eccentric circular motions
to the bed that held the work, while a stationary engraving
point traced a regular decorative pattern into the metal.
Similar machines cut evenly spaced straight or wavy lines.
The precise, intricate and always consistent designs were
difficult to copy by hand.
Many banks adopted Perkins’ methods of mechanized
engraving, producing notes thought to be beyond the talents
of any counterfeiter. An 1809 Massachusetts law required all
banks in the state to employ steel engraving for notes. The
Perkins system had, it seemed, dealt a death blow to
counterfeiting. In 1851 H.C. Foote, the author of a treatise on
detecting counterfeits, opined that “since the invention of the
Geometric Lathe, Ruling Engine, . . . and the invention of
transferring engraving by Perkins, it has been rendered
entirely out of the question -- in fact a physical impossibility --
for any genuine note to be perfectly imitated.”
Mr. Foote was only technically correct. The nation was even
then enduring an orgy of counterfeiting. It was the American
banking system, rather than any technological weakness,
that made the currency vulnerable. When Thomas Jefferson
took office in 1801, only one federal and thirty state-
chartered banks existed in the U.S. The number of state
banks had risen to 208 in 1813; by the Civil War there were
more than 1,600. These banks churned out an astounding
seven thousand varieties of notes.
Each bank designed its own notes and issued its own
denominations without reference to any standard. The same
vignettes were used on bills of different denominations,
making it easy for “koniackers” to raise notes. The situation
went from bad to worse in the 1830s and 1840s. State
charters were absurdly easy to come by. One “wildcat” bank
in Vermont consisted of nothing more than a wooden desk
and a few sheets of paper. There were instances of barbers
and bartenders going into the business and issuing notes.
Perkins’ system allowed bankers to choose from a wide
range of vignettes, border designs and other decorations,
and they did so with abandon. A Delaware City Bank dollar
bill featured four vignettes: a young woman leaning against a
shield, a passenger train, a farmer with a sickle, and a small
dog. Classical gods and goddesses competed with scenes of
labor and industry. Notes of the Bank of Saint Nicholas in
New York showed a jolly Santa Claus descending a chimney.
The result was utter confusion. The line between banking
and counterfeiting blurred. The detective Allan Pinkerton
observed that many citizens preferred a “good counterfeit on
a solid bank to any genuine bill upon the shyster institution.”
For counterfeiters, the situation was ideal. They could buy
elaborately printed notes of defunct banks for practically
nothing, scrape off the name of the issuing bank, and
substitute a sound one. A merchant presented with a bill had
to ask: Does this bank existed? Is it solvent? Does this note
bear the proper design? Has it been printed legitimately or is
it a copy? A customer could raise the same questions about
the change he received.
Counterfeiters turned Perkins’ system to their advantage.
The plates of “blown” banks were frequently auctioned off.
Counterfeiters could purchase vignettes and designs from
banknote printers with little trouble. It became relatively easy
to assemble a plate to print a note. If the design wasn’t
exactly the same as the original, the bill could often be
passed anyway -- merchants rarely had another specimen
with which to compare it. Once his fraud was detected, the
counterfeiter could assemble a new design with the same
elements, inserting the name of a different bank.
One obvious defense was a list identifying which notes were
good, which bogus. The earliest “counterfeit detector” was
published in Boston in 1805. The publications became
ubiquitous by the 1820s. They described what a legitimate
bill should look like and listed the various counterfeit,
spurious, altered, and raised notes that had turned up. Soon,
it was said, “no merchant or mechanic deems himself safe
unless he consults the ‘counterfeit detector.’”
Payton’s Counterfeit Detector of 1839 listed 1,395
counterfeits, including 20 fictitious banks, 43 banks whose
notes were worthless, and 54 bankrupt banks. Though the
detector was meant to reassure those accepting currency, as
a Boston writer noted, it “reveals . . . a dim outline landscape
of a great system of counterfeiting.”
By 1853 a New York bank teller was ready to declare the
“danger that the whole system of bank paper for currency
may yet have to be abandoned,” because of forgeries. The
New York Times raised an alarm in 1862, claiming that eighty
percent of banknotes then circulating were bogus.
Counterfeiting, the newspaper declared, was “undermining
our morality as a nation.” More conservative estimates
speculated that from a third to a half of U.S. currency was
bogus, still a disquieting proportion.
Counterfeiting rings employed out-of-work engravers,
assembled substantial printing works, and used a network of
wholesalers to distribute their notes, and “shovers” to put
them into circulation. Unscrupulous merchants joined in the
trade, handing out counterfeits as change. These
perpetrators were in turn hoodwinked by swindlers who
advertised “money making opportunities” by mail order. One
practitioner of this “green goods” scam in the 1860s sent
interested parties a genuine five-dollar bill, claiming it was an
example of his skill at counterfeiting. He included a price list
for other denominations. The takers, who were many, could
hardly complain to authorities when they found themselves
taken.
A new factor entered the equation during the Civil War when
the national government began issuing paper money for the
first time since the Revolution.  The notes were marked by
portraits as well as by traditional vignettes. A face was easy
to remember but difficult for a counterfeiter to copy
accurately: a minor flaw in the engraving would throw off the
expression. The front of the bill was printed in black, the back
in a green tint considered more indelible than other inks. The
color of these “greenbacks” came to represent the security of
U.S. currency.
The changeover to a national currency actually encouraged
counterfeiters. The federal provenance meant that users did
not look at the new notes with same skeptical eye they had
applied to state bank currency. To deal with continued
counterfeiting, the Treasury Department took the
extraordinary measure of hiring agents to hunt down forgers
-- the first real police authority assumed by the federal
government. The Secret Service, founded in 1865, was led
by the unscrupulous detective William P. Wood, who set out
to capture counterfeiters and “to convince such characters
that it would be no longer healthy for them to ply their
vocation without being handled roughly.” Wood was soon
ousted; his rough-and-ready band of detective evolved into a
highly effective enemy of counterfeiting. By infiltrating
“coney” rings and tracking the sale of printing supplies, they
were largely successful in squelching the counterfeiting
epidemic by the end of the nineteenth century.
Perkins’ engraving system remained a central weapon in the
effort -- it presented a continuing challenge to the skills of
counterfeiters. This was especially true as the government
moved toward greater standardization of currency, a practice
Perkins himself had recommended decades earlier.
The distinctive paper used for banknotes was another
obstacle to counterfeiting. Going back to the Revolutionary
era, the government had ordered paper makers to embed
tiny chips of mica and silk fibers in their stock to make
banknote paper identifiable. In 1869 the paper used for
fractional currency -- notes worth less than a dollar --
contained “silk fiber of two different colors . . . and also a
watermark.”  The watermark, invented in thirteenth century
Italy, was a thickness variation incorporated into the paper
during manufacturing. The paper itself was made from a
durable combination of cotton and linen, giving it a distinctive
feel.
“Coney men” developed their own weapons. Even before the
Civil War, they had begun to employ a technology that vastly
simplified their work: photography. An 1856 issue of Banker’s
Magazine worried that the novel technology would “enable
expert photographers to copy bank notes with such degree
of skill as to deceive all but the very best judges.” Using light-
sensitive chemicals, a counterfeiter could achieve almost
perfect facsimiles in a few hours rather than the months it
took to engrave a plate. These early counterfeits were simply
two photographs of bills printed on paper and pasted
together.
Because the photo process was color blind, banks began
printing large letters or figures in red, blue or green to thwart
the technique. The eye easily distinguished vignettes printed
in black over other features in color; the camera did not. But
creative masking, bleaching, and photographing through
filters allowed the skilled counterfeiter to separate colors and
print different parts of the bill separately.
During the 1880s the counterfeit wars further escalated with
the advent of
photolithography and photoengraving. These techniques
used the photographic process not for making direct copies
of money, but for creating plates by which bills could be mass
produced. The lithographic method applied the image of the
bill chemically to a stone or a zinc plate. Photoengraving was
an etching process in which an image was deposited on a
plate by photography and then cut into it with acids. Accurate
reproductions could be made, though the lines were never as
crisp as the original.
Master engravers Baldwin Brendell and Arthur Taylor were
so adept at these photo techniques that they were actually
able to make a photoengraving plate in their jail cell using
smuggled tools, chemicals from the prison kitchen, and
sunlight. At the time, they were awaiting trial for producing
superb copies of hundred dollar bills.
At first, photographic reproduction had its limits. Fine
engraving and intricate lathe work were difficult to reproduce
-- the space between the lines tended to close up during the
printing process. Photo methods, though, remained the
counterfeiter’s most potent tool for a century. Modern
refinements made it possible for counterfeiters to produce
almost perfect plates of a bank note from photographs. The
equipment required, though, remained highly specialized and
called for advanced skills as a printer. Its dissemination has
long been monitored by the Secret Service.

Counterfeiting has always attracted an array of practitioners
as colorful as they were technically skilled. One who
operated during the nineteenth-century heyday of the art
was William E. Brockway, a gaunt, sharp-nosed man known
as Long Bill. Born in 1822, Bill went to work as a boy for a
New Haven printer who handled banknotes. He sat in on Yale
classes in electrochemistry and law and was thought a
promising student.
The banks who were his employer’s customers kept the
plates for their notes in vaults and lent them to the printer
under strict supervision. During the 1840s, Brockway and an
accomplice distracted a bank official long enough to run a
lead sheet through the press, making a copy of the engraved
plate. By depositing a layer of copper on the purloined lead
impression, Bill created a serviceable copper plate identical
to the original. Brockway set off on a career of counterfeiting
that would span the rest of the century. The New York
Journal of Commerce in 1849 reported that his fakes
“created much astonishment by the accuracy with which they
were engraved.” Over his entire career he might have printed
$10 million in bogus bills.
Another notable coney man was Emanuel Ninger, a German
immigrant and sign painter by trade. He settled on a New
Jersey farm in 1883 but didn’t have much luck raising cows
and chickens. Instead, he purchased some good quality
bond paper, cut pieces to note size, and soaked them in
weak coffee to give them an aged patina.  The psychology of
counterfeiting has always dictated that bills that appear used
are easier to pass than new ones. While the paper was still
wet, Ninger laid it over a genuine bill -- twenties and fifties
were his favorites -- which he had mounted on glass over a
light. He could now trace the design of the original in pencil.
Once the paper had dried, he carefully went over the pencil
marks in ink. He didn’t try to copy the intricate lathe work,
only suggested it with deft touches. He added color with a
fine brush.
It probably took him the better part of a week to complete a
copy. The last Friday of every month he traveled into New
York and made small purchases with his bills, pocketing his
change. His forgeries were discovered midway through his
career, but Ninger’s identity remained unknown. The New
York Times in 1892 described a “particularly fine counterfeit”
of a fifty-dollar bill, which had been inspected by bankers and
“received the respectful consideration it deserved.” Some
who received the artistic copies had them framed and even
sold them for more than their face value.
Ninger’s efforts pointed up a flaw in the government’s
strategy for fighting counterfeits. Finely detailed and difficult-
to-copy engraving and lathe work went for nought if citizens
didn’t pay attention to the bills they handled. Most didn’t.
In 1896 Ninger made the mistake of laying one of his bills on
a wet counter in a bar. The ink ran and the culprit the
newspapers had dubbed “Jim the Penman” was
apprehended. Widely admired for his artistic flair, he
received a light sentence for his fourteen years of
counterfeiting.
Ninger was the exception. For the most part, counterfeiting
required substantial capital investment. Skilled engravers
and printers were needed, as well as an army of wholesalers
and shovers. The rings were vulnerable to infiltration by the
Secret Service. By 1903 it was estimated that only a single
counterfeit dollar was circulating for each $100,000 in
currency, quite a turnaround from the days when half the
legal tender in the country was suspect.

Counterfeiting continued at a relatively low level through the
first half of the twentieth century. In 1929 the Treasury
reduced the size of bills and took a final step toward
standardization. Each denomination, whether silver
certificate, Federal Reserve note, or whatever, would have
the same portrait and the same vignette on the reverse.
Raising notes became more difficult – a “ten-dollar bill” with
George Washington’s face was unlikely to fool a merchant.
The designation of the issuing bank was reduced to a small
code, further simplifying the design. At the same time, the
strips of silk threads were replaced by the subtle red and
blue fibers that mark today’s money. These were difficult to
copy with any existing technology.
By the middle years of the twentieth century, fully ninety
percent of counterfeiters were being apprehended and the
government was confiscating most bogus money before it
was spent. In succeeding decades, however, a whole new
front of the counterfeit war began to open up. The ubiquitous
Xerox machine arrived in the 1960s, and color copiers
followed a decade later. Early copiers could not accurately
reproduce banknotes -- the fine engraving on genuine bills
was a particular challenge. The machines, though, were
harbingers of things to come.
Serious new counterfeiting tools arrived in the 1990s.
Photocopiers based on digital technology could turn out ever
higher quality reproductions. In 1990 a color scanner
capable of 600 dots per inch resolution sold for $10,000.
Today a scanner that can pick up 4800 dots per inch costs
about $500. Professional-quality print and imaging software
also has become easily affordable. By the end of the 1990s a
“desk-top publishing” outfit consisting of a personal
computer, scanner and ink-jet printer could reproduce
currency with alarming accuracy. Replicas of watermarks and
color tints are within the capabilities of many machines.
At the same time, hostile governments and organized crime
cartels abroad set up counterfeiting operations that
produced what are sometimes called “superbills.” Though the
Treasury Department has never confirmed the details,
hundred-dollar notes passed into circulation that fooled the
Department’s own sophisticated scanners, which test bills on
several dozen parameters. Drug runners in Colombia have
bleached dollar bills and use photolithography to print the
images of hundreds on the paper. It is estimated that as
much as three-quarters of all counterfeiting of U.S. currency
occurs outside American borders.
The counterfeiter using a home computer needs neither
specialized skill, a large investment, nor a network of
distributors for his casual forgery. A foreign, industrial-level
operation is largely beyond the reach of domestic legal
sanctions. Both threats presented new challenges to the
money supply in the 1990s, prompting the U.S. Treasury to
redesign American currency for the first time in sixty-five
years.

Interestingly, many of the anticounterfeiting measures that
the Treasury put in place were updated versions of
technologies first used in the nineteenth century or earlier.
Fine engraving and intaglio printing remained at the heart of
currency security. The first redesign, in the mid-1990s,
enlarged the hallmark portraits and enhanced their details.
These heads of presidents and statesmen are the most vivid
identifying characteristics on the bills and the hardest to
replicate. Months of hand engraving with a steel tool and
magnifier went into the new designs. The craft is still highly
specialized -- only a few dozen persons in the world possess
the skills to render banknotes accurately.
The Treasury had already added a modern twist to two other
traditional features. Starting in 1990, instead of a band of
silk, the paper manufacturer wove in a polymer thread about
1.5 millimeters wide printed with the bill’s denomination and
“USA.” This security thread is only visible when light shines
through the note, and it glows a distinctive color under
ultraviolet illumination. Improving on Perkins’ machined
engraving, the Treasury added computer-generated
microprinting to some design features. This print, only .18
millimeters high, looks like a ragged line to the naked eye,
but resolves into words under a magnifying glass. It presents
the ultimate challenge to scanners and printers, whose
resolution is limited by the digital sampling techniques they
use to construct images.
The new money reinstated the watermark, which had been
dropped from U.S. currency in 1879. An outline version of the
portrait, incorporated during paper manufacture, can be
seen off to the side when light shines through the note.
Some features on today’s money are printed with color-
shifting ink, which uses tiny plates of thin-film filters as the
pigment and shows different shades from different directions.
Glittery metallic inks are also used. Both are hard to copy.
Even this technology is not entirely new. Some fractional
currency of the Civil War era included a shiny copper-colored
ink to thwart counterfeiters.
The most distinctive change in the redesign now taking
place is the addition of color, which had first been included
on bills during the early days of photography. The Treasury
has begun printing new twenties and fifties with subtle
shades of peach, blue, yellow and red. These are not solid
colors but complex patterns of colored lines that are difficult
to reproduce accurately. Color versions of other
denominations will be added in the future.
Even as the redesign was in progress, the digital technology
available to counterfeiters was becoming increasingly
sophisticated. The first counterfeits of the new bills appeared
the week of issue, with some forgers substituting party glitter
for the Treasury’s iridescent ink. But counterfeiters seeking
to accurately replicate genuine bills must endure a learning
curve. That’s why the Treasury plans to alter currency design
every seven to ten years, forcing forgers to start from scratch
with each new issue.
Several measures have been put into place to block the
passing of the bogus bills. Some merchants use iodine pens
to check for forgeries. Iodine will turn the starch in ordinary
paper black. The rag paper used for genuine bills contains
no starch.
Casino operators in Las Vegas have begun to count cash
with machines that test for counterfeits. These bill validators
were originated in the late 1960s by vending machine
companies. It’s difficult for counterfeiters to fool a machine.
The ink used to print currency has a high iron content and a
distinctive magnetic signature. Scanners detect this pattern
and use optical readers to measure the levels of light
transmitted as a bill passes beneath.
On another front on the anti-counterfeiting war, the
government has urged the manufacturers of color copiers,
scanners, and printers to add codes that can detect
banknote designs. Canon copiers, for example, print a blank
when they recognize a bill. They also include on every copy a
code in microdots that identifies the specific machine used
and can be deciphered by the Secret Service.

In addition to updating old anti-forgery techniques, the
government has begun to contemplate new technologies for
keeping currency safe. One idea is to substitute plastic for
paper. Plastics are durable and allow for a wide range of
security devices. For example, designers can leave a clear
window in the note, a feature impossible to copy on paper.
Australia has been using plastic currency for nearly a decade.

Holograms, already in use on credit cards, might be a way of
making currency harder to copy. Bar codes are another
possibility. They could mark the bill with a code coinciding
with its serial number. Special scanners employing public
encryption keys could detect phonies with infallible accuracy.
Radio frequence identification chips, about 4 millimeters
square and embedded invisibly into banknote paper, have
also been considered. Special detectors at banks and stores
could authenticate the bills.
The Treasury has sought to balance a range of factors in
redesigning currency. One is cost. The new security features
already incorporated into the currency have raised the cost
of producing each note from less than five cents to about
eight cents. The Bureau of Engraving and Printing produces
about 9 billion notes a year, so every penny adds $90 million
to the Treasury’s yearly budget. Privacy is another concern.
Strict anonymity is an important feature of currency for many
users. Any system that would allow bills to be tracked by
scanners would meet resistance.
One thing is certain, this game of technological one-
upmanship will continue indefinitely. The allure of “making”
illicit money remains deeply embedded in the human psyche.
As the colonial silversmith and incorrigible counterfeiter
Gilbert Belcher declared, “No gain afforded me so much
pleasure as that which I acquired by illicit means.”

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